Consumer lending efficiency: commercial banks versus a fintech lender

Financial Innovation

Table 10 2016 relationship of financial performance measured by Tobin’s q to the ratio of nonperforming unsecured consumer loans to total unsecured consumer loans

Parameter	Variable	Coefficient estimate	Pr( >\|t\|)
β₀	Intercept	− 2.22050	< 0.0001
β₁	ln(book value of asssets_i in 1000 s)	0.38138	< 0.0001
β₂	[ln(book value of asssets_i in 1000 s)]²	− 0.01095	< 0.0001
β₃	equity capital_i/book value of assets_i	0.31487	0.0027
β₄	unsecured consumer loans_i/total loans_i	0.12164	0.1072
β₅	nonperforming consumer loans_i/total unsecured consumer loans_i	− 0.03309	0.6860
β₆	[unsecured consumer loans_i/total loans_i] × [nonperforming consumer loans_i/total unsecured consumer loans_i]	− 2.43770	0.1140
# of entities	∂(q ratio)/∂(nonperforming loan ratio) > 0	N = 0
	Significantly > 0	N = 0
# of entities	∂(q ratio)/∂( nonperforming loan ratio) < 0	N = 205
	Significantly < 0	N = 205

The data set includes 205 top-tier publicly traded bank holding companies at the end of 2016 with plausible values of nonperforming unsecured consumer loans and total loans exceeding 10 percent of assets. Financial performance is gauged by Tobin’s q ratio. Nonperforming loans are the sum of past due and nonaccruing loans and gross charge-offs. Total unsecured consumer loans include gross charge-offs. Statistical significance is computed from robust standard errors. Bold values indicate statistical significance at stricter than 0.10. Adjusted R² = 0.6626. AIC \(=-\!\)1358